Friday, September 10, 2010

Supply and Demand

We had an interesting lecture recently in our Economics class about supply and demand. One of the more interesting examples demonstrated what happens when public policy artificially shifts the demand slope. The example highlighted the rent control policies in New York City. Because prices were kept artificially low, demand for apartments skyrocketed. The demand was so great at times that people could be seen standing outside the newspaper offices in the wee hours of the morning so that they could be the first to get a jump on newly available apartments. Here's the interesting part. They weren't looking at the classified, they were looking through the obituaries.

The lesson learned was that as some costs are artificially kept low (rent), other costs increase, like the obtrusive behavior of someone showing up on your doorstep early in the morning the day after your loved one passed away to ask for their apartment. The class discussion wasn't that rent control and other policies that interfere with natural supply and demand are bad necessarily, it was that there will always be other costs associated when supply or demand is shifted artificially, and these things need to be considered when establishing policy.

This is just one example of a situation where economics has something to say. I'm finding the Jenkins MBA course material very interesting and I can see how having a solid understanding of economics as a manager will be a very beneficial thing for my future career.

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